Early channel checks with clients indicate general strength in Q3’25 and cautious optimism but not yet outright confidence. On the headwind side that may be underappreciated by investors (based on our recent Inside The Buy-Side® surveys) is the softening labor market and impact of the government shutdown.
Recent earnings calls reflect a complex environment. It’s still tough sledding for many, particularly those tied to residential and industrial end markets not benefiting from large capital projects.
As we wrap up our coverage of Q2’25 earnings season, it’s clear that companies have largely been able to deliver solid results despite ongoing macro uncertainty, in part driven by consensus estimates having been meaningfully lowered following last quarter.
Our analysis finds the fundamentals of the Materials sector – a bellwether for the global economy – remain challenged as companies continue to operate in a landscape defined by persistent uncertainty, shifting global trade dynamics, and softer-for-longer demand dynamics.
The Consumer Discretionary sector continues to weather a challenging and volatile trade policy environment. While a sense of “cautious optimism” has emerged, companies are actively managing tariff-driven cost pressures and discerning consumer spending patterns.
The tone this earnings season is more confident about the future even as headwinds remain. Confidence can support capex, and we will see if Q2 is enough to get the engines firing on all cylinders for the back half strength that has eluded us for several years now.
Earnings season is off to the races and our channel checks indicate a resilient economy across many end markets despite tariffs and continued global uncertainty.
Another earnings season is just around the corner, and investors are sure to be scrutinizing Q2 results and probing for insights into how companies are navigating the evolving and complex macro landscape.
As we wrap up one of the more extraordinary earnings seasons in years, it’s clear that companies were largely able to deliver solid earnings results during Q1 owing in part to pull-forward buying behavior ahead of tariff impact, though challenging dynamics existed for certain sectors, most notably Materials and Energy.
Our analysis reveals the fundamentals of the Materials sector remain challenged, albeit at uneven levels, with outlooks clouded and executives preparing for various scenarios contingent upon how trade negotiations unfold and the extent to which tariff impacts ripple through the economy as the year progresses.
